Most investors would be fairlysatisfied with a 20% rise in one of their holdingsover the course of a year. After a roller coaster 2016 however, some of those withstock in Sirius Minerals (LSE: SXX) may beg to differ. Nevertheless, I think investors should be delighted with the progress made by the company over the last 12 months.
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Things only really kicked into gearfor Sirius in March. It was then that the company announced the findings of its two-year Definitive Feasibility Study. Based onaverage operating costs of$27.2 per tonne, it was suggestedthe companycoulddeliver eye-popping cash margins of 70%-85% withannual earningsestimates ofbetween $1bn and $3bn.Add in an 100-year life span for its mine and a net present value of $27bn at the beginning of production and its easy to see why the company began courting attention.
That said, it wasnt until July and August while somany of uswere still considering the consequences of the UKs decision to leave theEU that shares in Sirius began to soar. Whilefinally receiving approval for itsharbour facilities at Teeside will have contributed to this rise, the scale of the jump (from under 20p to over 50p)suggested a degree of hype was taking over. After all, funding for the polyhalitemine still needed to befound. When this didnt arrive as soon as some hoped,shares began to drift downwards.
When it eventually announced its financing solution in November including an open offer for existing shareholders Sirius was back makingheadlines. On learning that new shares would be issued at20p, many holders were dismayed. Cue a mass sell-off as a proportion of investorstook up the challengeof attempting to buy all their shares back at a lower price. With the share price now just below 18p, I tip my hat to those who followed this course of action.
So, how will shares in Sirius perform in 2017? Ill save my thoughts onthat for when I next look at the company inJanuary. For now, heres what I think long-term investors particularly those holding paper losses shouldhold on to.
While a big red mark in your portfolio is never pleasant to look at, it mustnt beforgotten just how far Sirius has come in a single year. Heres a company that has successfully negotiated all obstacles in its way from obtaining all necessary planning permission for the mine (no mean feat given its location in a national park) to raising the finance needed to actually build it.
Sirius Minerals was and will continue to be a share that only those with sufficiently long investing horizons and tolerance for risk should consider for their portfolios. If ever there was a project that called for steady nerves and patience beyond that usually expected for an investment to come good, this is it.
For some investors, this may be asking too much. Perhaps the biggest revelation for investors in Sirius this year was discoveringjust how long theyre truly prepared to hold the stockfor. In my opinion, this is just the end of the beginning of what could be a tremendousand highly profitable project for shareholders and the UK in general.
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Paul Summers owns shares in Sirius Minerals. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.